Working In Real Estate: Commercial Property Boom Builds Up MBA Careers
The commercial property market is booming. MBA students are sought after for real estate roles in private equity finance, and project and portfolio management in both the US and Europe.
The business of commercial property is booming. Annual global property investment volumes exceeded $600 billion in 2014, up by around 15% on 2013, according to figures from Knight Frank, an independent property consultancy.
The low interest rate environment and a flush of capital from quantitative easing have pushed investors to find new sources of yield. Real estate has been one of the biggest beneficiaries, with insurance companies and asset managers rapidly expanding into the commercial property sector, according to research by De Montfort University.
Global investment volumes are poised to rise by a further 11% in 2015, says Cushman & Wakefield, a commercial real estate services firm, and this is building up employment opportunities for talented professionals.
“We have experienced a particularly strong employment market,” says David Funk, director of the Baker Program in Real Estate at Cornell University’s business school, with commercial real estate job opportunities back to the levels last seen in 2007.
Total job openings in real estate grew by 23% in 2014, according to research by Cornell and the SelectLeaders Real Estate Job Network, an online recruitment network.
This is being driven by a buoyant market, which is pushing up asset prices in core global cities, with growth led by the US and Europe.
Europe’s publicly listed property industry is small; most major players come from the US or Asia, but it is expanding and fast. Europe saw $241 billion of commercial real estate transactions in 2014, a rise of 13% year-on-year, according to figures from Real Capital Analytics, a research firm.
Recruiters in the industry are seeking managers with multi-sector experience, say experts, opening up a path for graduates of MBA programs in particular to lead the growth of the commercial property market.
MBA students are sought after for real estate roles in private equity finance, project management, and asset and portfolio management, say careers managers.
Alternative finance houses are beginning to make their mark, with nearly a quarter of new UK commercial property loan originations coming from non-bank lenders in 2013, according to researchers at De Montfort.
They are joined by a range of other financial services groups including hedge funds and private equity investors, as banks continue to scale back their involvement.
Real estate is a cyclical industry. Current growth rates mean there is strong demand for talent from companies from across the spectrum of real estate investors and advisors, says Todd Carson, MBA career management advisor at Wharton, a top US business school.
“From development to investment banking to private equity, firms are consistently coming to Wharton,” he says, with opportunities available on both the sell-side and the buy-side.
This, coupled with promising growth in the commercial property market, has prompted a stream of real estate-specific graduate programs to be launched at top schools.
Wharton is one of them. It has offered a real estate concentration for MBA students and undergraduates since 1985 but more recent developments have seen the programs' scope expand. The MBA concentration covers topics including economics, urban fiscal policy, and real estate law.
While student activity in the industry dropped off during the global financial crisis MBA interest has come roaring back at many business schools in the US.
MBAs are just now realizing the opportunities available to them in real estate, says Andrea Heuson, director of real estate programs at University of Miami. “They have jumped on the bandwagon as the sector [has] recovered,” she says.
Students of Miami’s courses flock to the booming commercial sector, she says, as financial and marketing analysts. They are hired by developers, capital provision intermediaries, private equity firms, lenders and corporations that own REITs – Real Estate Investment Trusts.
In commercial real estate hotspots such as London, sovereign wealth funds are battling institutional investors like pension funds and insurance companies for property.
The boom is driving a wave of consolidation in the sector, as companies such as Cushman & Wakefield, Colliers, DTZ and Savills look to take on market juggernauts like CBRE.
Many of the biggest companies in Europe are also choosing to specialize in particular sub-sectors of the market.
Andrew Vaughan, chief executive of real estate investment manager Redevco, says that managers must focus more on individual sectors because they have become more complex.
“What we’ve done in the last few years is focus on what we think is our core competency,” says Andrew, whose firm has around 450 primarily retail properties across 10 countries in Europe, specializing in high street retail.
Mat Oakley, head of European commercial research at London-listed Savills, says there is a “massive shortage” of local development expertise in the real estate market.
He adds that cross-border investors want that expertise. “If I was having my time over again I would get to know a market or sector intimately,” he says.
Business schools may offer such expertise. Employers look to MBA students for specialist knowledge, says Sharon McCabe, senior lecturer in real estate at Wisconsin School of Business.
“Employers want students who understand all facets of the asset – not just the projected income and expenses,” she says.
Yet while many property firms tend to focus on specific markets, careers tend to be global in reach.
US real estate investment group JLL, for instance, plans to hire 1,000 more employees in India in 2015 for its research, consultancy, and facility management services teams.
“The crisis demonstrated that real estate, even though it’s primarily local, is a global asset,” says Andrew Petersen, practice area lead for finance at K&L Gates, the US-based international law firm.
With $51 billion flowing into prime commercial properties – properties worth more than $10 million – in 2014, New York and London remain the favoured destinations, according to Knight Frank, cities viewed as safe havens among investors.
Asia, however, is increasingly attractive. Knight Frank is forecasting a new wave of Chinese investment from state-owned enterprises and the wealthy, and that large scale Japanese pension funds will diversify into property.
Looser regulations in countries like China have helped stimulate the global market, according to CBRE, allowing for direct overseas investments and higher real estate allocations.
“The recovery of the housing market has helped the economy as a whole gain momentum and lowered the perceived risk within the industry,” says Sharon at Wisconsin.
She adds that there are more employers hiring these days and most students enter the investment side of the sector.
CBRE, for example, runs a paid, full-time summer associate program for MBAs that provides an in-depth introduction to its corporate services business. Candidates are placed in areas including business development and strategy consulting.
While traditional commercial property segments like retail are fuelling the current real estate boom, there are pockets of growth in new areas of interest, such as logistics, and property for the student and elderly populations, according to real estate advisers.
Investors poured €19.8 billion into e-commerce-type properties such as warehousing and distribution hubs in 2014, a seven-year high and a 34% rise year-on-year, according to figures from Property Data, an investment data supplier.
“We see logistics as a very attractive property type on a global basis,” says Jeremy Plummer, chief executive of CBRE Global Investment Partners.
He adds that the growth of e-commerce has seen the online retail market emerge as the winner in a commercial property war in which physical shops are often the losers. “It’s a market that I think has got a lot, lot further to go,” he says.
The threat to the commercial property business is changing demographic trends. There is a boom in remote working and project-based consultancy work.
Virgin Media Business forecasts that 60% of office based employees will regularly work from home by 2022.
This is driven by innovation in digital tech. "Technology will continue to transform how we will work over the next decade,” says Michael Rendell, global HR consulting leader at PwC.
Todd at Wharton says that negotiation and project management skill-sets are critical to success in the real estate market.
But property is fundamentally a people business, according to Ginny Gibson, professor of corporate real estate at Henley Business School. “It’s about having the networks.”